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In 2001, the last time Outkast hit the road for a major tour, they were coming off a multiplatinum album and a Number One single, "Ms. Jackson." André 3000 and Big Boi played 46 shows on the Stankonia tour, and grossed $4.8 million, according to Pollstar. That sounds impressive – until you compare it with the reunion tour they're launching this spring and summer. Outkast will play fewer gigs – 40 shows, every one at a festival – and make vastly more money: around $60 million, according to concert-business sources.

Welcome to the strange economics of the modern rock festival, where every summer, defunct or dormant bands reunite to earn more for a few gigs than they did in years of touring and recording. Outkast, who haven't released so much as a new song in eight years, are the most extreme example yet: Unlike many big festival acts, they're not famous for their live performances. "For the good bands, there's always going to be demand if you're away a long time," says Charles Attal, a partner with C3 Presents, which produces Lollapalooza and Austin City Limits. Outkast's success reflects a new reality: Thanks to huge competition for "event bookings" that sell $300 tickets and even more expensive VIP packages, festivals can afford to pay headliners up to $4 million.

All of this is possible because festivals have come to dominate the music industry, with more than 60 slated to take place in the U.S. this year. Fifteen years ago, when Coachella organizers got 25,000 people to see Rage Against the Machine and Beck in the California desert, nobody could have predicted that an event like Las Vegas' Electric Daisy Carnival would draw more than 400,000 people for a single weekend. "Festivals have become a huge part of American culture," says Pasquale Rotella, chief executive of Insomniac, promoter of Electric Daisy, which began as a rave in 1997. "When we first started, it was really foreign – all people could remember was Woodstock. It made it really difficult to explain. That's no longer true."

Festivals have changed the way music is experienced – and released. A fan with a Spotify account and a Bonnaroo ticket can sample hundreds of bands, live or on record, in one weekend. "It's a good time to be a fan, if you just want a piece of everything," says Ben Dickey, manager of indie band Spoon, whose new album coincides with a tour that includes dates at Governors Ball and Shaky Knees this summer. "[Spoon] is going to play to tens of thousands of people at each festival – that's a pretty huge promotional platform for new songs."

It's not just big names who are cashing in. In the Nineties, when Neutral Milk Hotel recorded their landmark album In the Aeroplane Over the Sea, the group was lucky to make a few hundred dollars per show. But this summer, the band, whose last LP came out 16 years ago, will pull down much more money a night at festivals like Bonnaroo and Pitchfork. "You can add a lot of zeroes, basically, to what they made," says Jim Romeo, the group's booking agent.

A decade ago, festivals had distinct personalities: Coachella had the alt-rockers, Bonnaroo was more of a jam-band event. But as crowds grew, major headliners became harder to find, which meant more pressure to score high-profile reunions or megastars like Bruce Springsteen, whom Bonnaroo's promoters spent years wooing before he agreed to headline in 2009. The fiercest competition is regional. Cliff Burnstein, co-manager for Metallica and Red Hot Chili Peppers, says California is one of this summer's big battlegrounds, now that Jay Z's Made in America will be in Los Angeles, joining Outside Lands in San Francisco and BottleRock in Napa Valley. "They will fight over the acts," he says.

Major festivals like Coachella and Lollapalooza regularly sell out within hours of announcing their lineups. One way those fests stay on top is with "radius clauses," which means bands can't perform at any other show – not even a club gig – within, say, 300 miles and four or five months of their festival date. That can make bands' summer schedules increasingly complicated, to the point that mega-booking agency William Morris Endeavor has had to create a separate department devoted exclusively to making bands' deals with festivals and managing their touring routes. "It's like playing air traffic control," says William Morris Endeavor' Kirk Sommer, agent for the Killers and the Arctic Monkeys. "You have to think about how playing Governors Ball in June could affect another festival in the fall."

Of course, not every festival succeeds – in recent years, Rothbury in Michigan, Bamboozle in New Jersey and Kanrocksas have folded, despite snagging strong headlining names such as the Black Keys and Foo Fighters. Bamboozle suffered from promoter infighting, Kanrocksas had trouble selling tickets and Rothbury couldn't line up consistently huge headliners.

"It sometimes takes years of development to get these events into profitability," says Bob Roux, Live Nation's co­president of U.S. concerts. In the earlier days of U.S. festivals, it was easier for independent companies to build a festival on niche music, like jam bands or electronic-dance DJs. That's not the case today. "There's a lot more politics and a lot more investment to make something happen," says Insomniac's Rotella.

Given the recent boom, you might think festivals have hit a saturation point. But numerous band managers and promoters say there's still room for growth. "It's getting dense," says Attal. "But I don't think it's peaked – it's just hit a pretty good stride."

Even for baby bands – if they get the right time slots and are able to play effectively to big crowds – festivals can make the difference between just surviving and thriving. "A festival pays three and a half or four times more than the average club show," says Dylan Baldi of Cloud Nothings, who are playing Bonnaroo, Pitchfork and several European fests this summer. "We're still a small-scale band, but the festival shows make you realize what happens when you try to become more popular."